Retirement Plan - KB Home
KB HOME
RETIREMENT PLAN
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TABLE OF CONTENTS
ARTICLE I
THE PLAN
1.1 Establishment of the Plan......................................... 1
1.2 Purpose........................................................... 1
ARTICLE II
DEFINITIONS
2.1 Definitions....................................................... 1
2.2 Gender and Number................................................. 5
ARTICLE III
PARTICIPATION
3.1 Eligibility for Participation..................................... 5
3.2 Date of Participation............................................. 6
3.3 Duration of Participation......................................... 7
3.4 Re-Employment..................................................... 7
ARTICLE IV
SUPPLEMENTAL RETIREMENT BENEFITS
4.1 Vesting........................................................... 8
4.2 Supplemental Retirement Benefits.................................. 8
4.3 Commencement and Duration......................................... 8
4.4 Benefits in the Event of Death.................................... 9
ARTICLE V
SPECIAL BENEFIT PAYMENT RULES
5.1 Receipt and Release............................................... 9
5.2 Acceleration...................................................... 10
5.3 Lump Sum Option for Beneficiaries................................. 10
ARTICLE VI
CHANGE IN CONTROL
6.1 Full Vesting and Lump Sum Option Upon Change in Control........... 11
6.2 Amount of Lump Sum Benefit........................................ 11
6.3 Advance Election.................................................. 11
ARTICLE VII
TRUST
7.1 Establishment of the Trust........................................ 12
7.2 Contributions..................................................... 12
7.3 Payment of Benefits............................................... 13
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ARTICLE VIII
ADMINISTRATION
8.1 Administration.................................................... 13
8.2 Decisions and Actions of Committee................................ 13
8.3 Rules and Records of the Committee................................ 13
8.4 Employment of Agents.............................................. 14
8.5 Agent for Service of Legal Process................................ 14
8.6 Plan Expenses..................................................... 14
8.7 Indemnification................................................... 14
8.8 Tax Withholding................................................... 14
8.9 Claims Procedure.................................................. 14
ARTICLE IX
MISCELLANEOUS
9.1 Rights Against the Company........................................ 15
9.2 Rights Under the Company's Other Retirement Plans................. 15
9.3 Payment of Benefits to Incompetent................................ 16
9.4 Missing Person.................................................... 16
9.5 Amendment or Termination.......................................... 16
9.6 Merger or Consolidation of Plan and Trust......................... 17
9.7 Arbitration/Interest on Unpaid Amounts/Controlling Law............ 17
9.8 Rights to Trust Fund Assets....................................... 18
9.9 Nontransferability................................................ 18
9.10 Illegality of Particular Provision................................ 18
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ARTICLE I
THE PLAN
1.1 ESTABLISHMENT OF THE PLAN
KB Home hereby establishes an unfunded supplemental retirement plan for
the benefit of certain selected executives of KB Home. This plan is effective as
of July 11, 2002 and shall be known as the KB Home Retirement Plan. This
Plan is intended to be an "employee benefit plan" within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended.
1.2 PURPOSE
The purpose of this Plan is to help KB Home attract and retain
qualified executives by providing certain selected executives with an
opportunity to supplement the benefits provided under the tax-qualified
retirement plans maintained by KB Home.
ARTICLE II
DEFINITIONS
2.1 DEFINITIONS
Whenever capitalized in this document, the following terms shall have
the meanings set forth below unless otherwise expressly provided.
(a) "ACT" shall mean the Securities Exchange Act of 1934, as
amended.
(b) "ACTUARIAL EQUIVALENT" shall mean a single sum present value
of a benefit amount otherwise payable, calculated using an
annual interest rate assumption equal to 100% of the
Applicable Federal Rate last announced by the Internal Revenue
Service prior to the determination for the period of time over
which the benefits (or remaining annual benefits, as the case
may be) would otherwise be paid, and based on annual
compounding.
(c) "ADMINISTRATIVE COMMITTEE" shall mean a committee composed of
one or more officers of the Company appointed by the Company,
acting through its Chief Executive Officer or a delegate of
such officer, from time to time. In the absence of such a
committee, references to the Administrative Committee shall be
deemed to be references to the Committee.
(d) "ANNUAL BENEFIT AMOUNT" shall mean the dollar amount,
determined by the Committee and set forth in the Participant's
Participation Agreement, that is to be used for purposes of
calculating the Participant's benefit opportunity under this
Plan.
(e) "BENEFICIARY" shall mean the person or persons last designated
in writing, on a form or in a manner approved by the
Administrative Committee, by a Participant to receive benefits
in the event of the death of the Participant. In the event
that a Participant failed to designate a beneficiary, or if
for any reason such designation
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shall be legally ineffective, or if all designated
beneficiaries predecease him or die simultaneously with him, a
distribution to which the Participant would have been entitled
under this Plan shall be made to the Participant's surviving
spouse or, if none, to the Participant's estate.
Upon the Committee or Administrative Committee being provided
with written notice of the dissolution of marriage of a
Participant, any earlier designation of the Participant's
former spouse as a Beneficiary for a portion or all of the
benefits specified herein shall be treated as though the
Participant's former spouse had predeceased the Participant.
Notwithstanding the preceding sentence, any designation of the
Participant's former spouse as a Beneficiary shall not be
treated as though the Participant's former spouse had
predeceased the Participant if, after the dissolution of the
Participant's marriage and prior to payment of benefits on
behalf of the Participant (1) the Participant executes and
delivers a new Beneficiary designation that complies with this
Plan that clearly names such former spouse as a Beneficiary,
or (2) there is delivered to the Plan a domestic relations
order providing that the former spouse is to be treated as the
Beneficiary. In any case in which the Participant's former
spouse is treated under the Participant's Beneficiary
designation as having predeceased the Participant, no heirs or
other beneficiaries of the former spouse shall receive
benefits from this Plan as a Beneficiary of the Participant
except as provided otherwise in the Participant's Beneficiary
designation.
(The following example illustrates the application of the
preceding paragraph. Assume that a Participant, "Participant
A," is married to "Spouse A" and that Participant A files a
valid and effective Beneficiary designation under this Plan
naming Spouse A as a 50% Beneficiary and each of Participant
A's two children with Spouse A (the "Children") as a 25%
Beneficiary. Assume that Participant A becomes divorced from
Spouse A after making such Beneficiary designation. Upon the
Committee or Administrative Committee being provided with
written notice of the divorce, Spouse A shall be deemed to
have predeceased Participant A for purposes of Participant A's
Beneficiary designation subject to the second sentence of the
preceding paragraph. If Participant A later dies without
having made a valid post-divorce Beneficiary designation under
this Plan and assuming that no Plan benefits have been paid
and that there is no domestic relations order to the contrary,
Participant A's Beneficiaries shall be deemed to be his two
Children, with each child being a 50% Beneficiary.)
Notwithstanding any of the foregoing to the contrary, a
Participant shall be treated as having revoked all prior
beneficiary designations under this Plan in the event the
Participant becomes married (or re-married following a
divorce, as the case may be) and such revocation shall be
effective upon the later of (1) the date of such marriage (or
re-marriage) or (2) the date that the Committee or
Administrative Committee is provided with written notice of
such marriage (or re-marriage); subject to any domestic
relations order providing that a former spouse of the
Participant is to be treated as a Beneficiary.
(The following example illustrates the application of the
preceding paragraph. Assume the same facts as in the last
example, except that after becoming divorced from Spouse A and
before Participant A's death, Participant A becomes re-married
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to "Spouse B," that the Committee or Administrative Committee
has written notice of such re-marriage, and that there is no
domestic relations order to the contrary. In this case,
Participant A's beneficiary shall be deemed to be Spouse B
(his spouse at the time of his death) because Participant A
shall be deemed to have revoked all prior beneficiary
designations under this Plan in connection with his
re-marriage. In the absence of a new valid and effective
beneficiary designation, Participant A's beneficiary is deemed
to be his or her surviving spouse as provided in the first
paragraph of this definition.)
(f) "BOARD" shall mean the Board of Directors of the Company.
(g) "CAUSE" with respect to a Participant shall mean a termination
of employment based upon a finding by the Committee, acting in
good faith and based on its reasonable belief at the time,
that the Participant:
(1) has been materially negligent in the discharge of his
or her duties to the Company or a Subsidiary,
repeatedly refused to perform stated or assigned
duties or is materially incompetent in or (other than
by reason of a disability or analogous condition)
materially incapable of performing those duties; or
(2) has committed or engaged in a material act of theft,
embezzlement or fraud; or
(3) has materially breached a fiduciary duty, or
willfully and materially violated any other duty,
law, rule, regulation or policy of the Company or a
Subsidiary; or has been convicted of, or plead guilty
or nolo contendere to, a felony or misdemeanor (other
than minor traffic violations or similar offenses);
or
(4) has materially breached any of the provisions of any
agreement with the Company or a Subsidiary; or
(5) has engaged in unfair competition with, or otherwise
acted intentionally in a manner injurious to the
reputation, business or assets of, the Company or a
Subsidiary;
provided, however, that, if a cure is reasonably possible in
the circumstances, no conduct (or lack thereof) referred to
above shall constitute Cause unless the Participant shall have
been given advance notice of such conduct (or lack thereof)
and a reasonable opportunity to cure such conduct (or lack
thereof) and such conduct (or lack thereof) is not timely
cured. In no event shall a cure period of more than fifteen
days be required.
(h) "CHANGE IN CONTROL" shall mean any change in control of the
Company of a nature that would be required to be reported in
response to Item 1(a) of the Current Report on Form 10-K, as
in effect on the Effective Date, pursuant to Section 13 or
15(d) of the Act; provided that, without limitation, such a
"Change in Control" shall be deemed to have occurred if:
(1) a third person, including a "group" as such term is
used in section 13(d)(3) of the Act, becomes the
beneficial owner, directly or indirectly, of 15
percent or more of the combined voting power of the
Company's outstanding voting
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securities ordinarily having the right to vote for
the election of directors of the Company, unless such
acquisition of beneficial ownership is approved by a
majority of the Incumbent Board (as such term is
defined in paragraph (2) below); or
(2) individuals who, as of the Effective Date, constitute
the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the
Board, provided that any person becoming a director
subsequent to the Effective Date whose election, or
nomination for election by the Company's
shareholders, was approved by a vote of at least
three-quarters of the directors comprising the
Incumbent Board (other than an election or nomination
of an individual whose initial assumption of office
is in connection with an actual or threatened
election contest relating to the election of the
directors of the Company, as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the
Act) shall be, for purposes of this provision,
considered as though such person were a member of the
Incumbent Board.
(i) "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
(j) "COMMITTEE" shall mean the Personnel, Compensation and Stock
Plan Committee of the Board (or a designee of that Committee).
(k) "COMPANY" shall mean KB Home, and any successor thereto.
(l) "DISABILITY" with respect to a Participant shall mean that the
Participant has become "totally disabled" (or the equivalent
term used if "totally disabled" is not a defined term) for
purposes of the long-term disability plan of the Company or
one of its Subsidiaries in which the Participant participates.
(m) "EFFECTIVE DATE" shall mean the effective date of this Plan as
set forth in section 1.1.
(n) "ELIGIBLE PERSON" shall mean any executive employed by the
Company or one of its Subsidiaries.
(o) "PARTICIPANT" shall mean any Eligible Person who has satisfied
the conditions for participation in this Plan as set forth in
sections 3.1 and 3.4.
(p) "PARTICIPATION AGREEMENT" shall mean a written agreement in a
form approved by the Committee or Administrative Committee,
and signed by a member of the Committee or by a member of the
Administrative Committee (in each case other than the Eligible
Person covered by the agreement), informing an Eligible Person
of his selection by the Committee as a participant in this
Plan, containing the Eligible Person's agreement to be bound
by the terms of this Plan, and setting forth such information
as may be required pursuant to section 3.1.
(q) "PARTICIPATION DATE" shall mean the date, determined by the
Committee and set forth in the Participant's Participation
Agreement, that is used in determining whether a Participant
is eligible for benefits hereunder upon or following the
Participant's Termination of Employment.
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(r) "PLAN" shall mean this KB Home retirement plan, as it may be
amended from time to time.
(s) "SUBSIDIARY" shall mean any corporation or other entity a
majority of whose outstanding voting stock or voting power is
owned, directly or indirectly, by the Company.
(t) "TERMINATION OF EMPLOYMENT" shall mean termination of
employment with the Company and its Subsidiaries, whether
voluntary or involuntary and including, without limitation,
any termination due to death or disability. A Participant's
termination of employment will be deemed to occur when the
Participant ceases to be a full-time employee of the Company
or one of its Subsidiaries, even though the Participant may
continue to serve as a director of or as a consultant to the
Company or one of its Subsidiaries. Notwithstanding anything
else contained herein to the contrary, a Participant shall not
be deemed to have had a Termination of Employment if his or
her employment by the Company or one of its Subsidiaries
terminates but he otherwise continues after such termination
as an employee of the Company or one of its Subsidiaries. If a
Participant is employed by a Subsidiary, and that Subsidiary
is sold, spun off, or liquidated and the Participant does not
continue as an employee of the Company or another Subsidiary
following that event, the Participant shall be deemed to have
had a Termination of Employment for purposes of this Plan.
(u) "TRUST" shall mean the legal entity organized pursuant to the
Trust Agreement between the Company and the Trustee to hold
and administer the Trust Fund in which any contributions made
by the Company are to be held, invested, and disbursed to, or
for the benefit of, Participants and their Beneficiaries.
(v) "TRUST AGREEMENT" shall mean the agreement in the nature of a
trust entered into between the Company and Trustee with
respect to this Plan.
(w) "TRUST FUND" shall mean the assets of every kind and
description held in the Trust pursuant to the Trust Agreement.
(x) "TRUSTEE" shall mean the entity, not affiliated with the
Company, acting as the trustee under the Trust Agreement at
the time of reference.
2.2 GENDER AND NUMBER
Unless the context clearly requires otherwise, the masculine pronoun
whenever used shall include the feminine pronoun, and the singular shall include
the plural.
ARTICLE III
PARTICIPATION
3.1 ELIGIBILITY FOR PARTICIPATION
Subject to Section 3.3, an Eligible Person shall participate in this
Plan only if:
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(1) he has been selected by the Committee and designated in
writing by the Committee as a participant in this Plan,
(2) he executes his Participation Agreement and returns an
original copy of such agreement, along with such
administrative and other forms as the Committee may require,
to the Committee no later than thirty (30) days after the date
of his Participation Agreement, and
(3) he timely completes any other participation conditions as may
be prescribed by the Committee or Administrative Committee and
set forth in the Participation Agreement (including, without
limitation, the completion and timely return of any consent to
insure forms that may be required by the Committee or
Administrative Committee in the circumstances).
The Committee shall send (or cause there to be sent) a Participation Agreement
to each Eligible Person that is selected by the Committee for participation in
this Plan. An Eligible Person's Participation Agreement shall set forth his
Annual Benefit Amount and Participation Date, each as determined by the
Committee. The Company shall notify, within ninety (90) days after the
applicable deadline, an Eligible Person who has failed to become a Participant
by virtue of not timely satisfying the eligibility requirement referred to in
either clause (2) or clause (3) above.
The Committee shall limit the group of all Participants to "a select
group of management or highly compensated employees" within the meaning of 29
C.F.R. 2520.104-23 or any similar successor provision.
The Committee shall designate an Eligible Person as a participant in
this Plan only if the Committee first determines that the inclusion of such
Eligible Person as a Participant will not result in the expected value of the
Trust Fund assets (including the expected value of any assets that are to be
contributed to the Trust Fund in connection with the designation of such
Eligible Person) being less than the Company's expected Plan benefit obligations
(including the expected value of the benefit obligations with respect to that
person if he becomes a Participant). The Committee may base such calculations on
any factors and assumptions that are reasonable in the circumstances. For
determinations made prior to a Change in Control, the Committee's determination
of reasonableness for such purposes shall be final and binding on all persons.
The Committee's failure to make such a determination (or an incorrect
determination) with respect to the designation of an Eligible Person prior to a
Change in Control shall not constitute a breach of this Plan and shall not give
rise to any right or claim of any Participant or other person. Furthermore, and
notwithstanding the preceding provisions of this paragraph to the contrary, an
Eligible Person who is designated by the Committee as a participant in this Plan
prior to a Change in Control and who has otherwise satisfied the Plan
participation conditions set forth above in this Section 3.1 shall not fail to
become a Participant merely because the Committee fails to make the
determination required by this paragraph and/or such determination is later
determined to be erroneous.
3.2 DATE OF PARTICIPATION
Subject to Section 3.3, an Eligible Person designated in writing by the
Committee as a participant in this Plan shall become a Participant as of the
date that all of the conditions to such participation, determined pursuant to
section 3.1, have been timely satisfied. The Committee may, however, establish a
Participation Date for any Participant that is earlier than, concurrent
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with, or later than such date. Once the Committee has established a
Participation Date as to a Participant, the Committee may not subsequently
change that date to a later date, but it may change that date to an earlier date
(thereby, in effect, accelerating that Participant's vesting opportunity under
this Plan). Any such change shall be made by a written amendment to the
Participant's Participation Agreement signed by a member of the Committee or by
a member of the Administrative Committee (in each case other than the affected
Participant).
3.3 DURATION OF PARTICIPATION
Participation in this Plan of any Participant shall continue while the
Participant is an employee of the Company or a Subsidiary, whether or not there
is in effect an employment agreement between the Participant and the Company or
any Subsidiary, and thereafter for so long as he is entitled to receive any
benefits hereunder. Without limiting the generality of the preceding sentence,
once an Eligible Person becomes a Participant, he may not (other than in
connection with a Termination of Employment for which he is not entitled to
benefits under this Plan or, following the commencement of benefits to the
Participant under this Plan, upon the satisfaction of all such benefits due to
the Participant) subsequently be removed from participation in this Plan;
provided, however, that the Committee may, in its sole discretion but only prior
to a Change in Control, rescind its selection of an Eligible Person as a
participant in this Plan if the Committee gives the Eligible Employee written
notice of such rescission no later than thirty (30) days (subject to extension
as provided below) after the date that the Eligible Person would have otherwise
become a Participant. Such a rescission shall be effective regardless of whether
the Eligible Person had otherwise satisfied the requirements for participation
in this Plan and, in the event of a rescission, the Eligible Person shall have
no right to benefits or other compensation with respect to this Plan or such
rescission. The Committee or Administrative Committee may, in its sole
discretion, extend the 30-day period referred to in the second sentence of this
paragraph by an additional sixty (60) days by written notice to that effect
given to the Eligible Person within the original 30-day period for a notice of
rescission. A Participant's Annual Benefit Amount may be changed only by a
written amendment to the Participant's Participation Agreement signed by a
member of the Committee or by a member of the Administrative Committee (in each
case other than the affected Participant); provided that the Committee may not
decrease a Participant's Annual Benefit Amount without the written consent of
the affected Participant. In no event shall reductions expressly contemplated by
this Plan (such as present value calculations, 6% haircut provisions, the 20%
reduction provision of section 4.1, and tax withholding provisions) be deemed to
be decreases to the Participant's Annual Benefit Amount for such purpose.
3.4 RE-EMPLOYMENT
If a former Participant later becomes re-employed as an Eligible
Person, he shall again become a Participant only if re-selected and
re-designated by the Committee as such pursuant to section 3.1 and only if the
other requirements of section 3.1 are satisfied with respect to such
re-selection. In such circumstances, the Committee may, in its sole discretion,
establish a new Annual Benefit Amount and/or Participation Date for the
Participant. If a Participant has a Termination of Employment, is receiving
benefits under this Plan and becomes re-employed by the Company or one of its
Subsidiaries, the Participant's benefits under this Plan shall, unless otherwise
provided by the Committee in the circumstances, be suspended for the period of
such employment and such benefits shall re-commence (without interest or
earnings for the period of the suspension) on the Participant's next Termination
of Employment.
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ARTICLE IV
SUPPLEMENTAL RETIREMENT BENEFITS
4.1 VESTING
Except as provided in the next sentence, a Participant shall be
entitled to the benefits described in section 4.2 only if the Participant's
Termination of Employment occurs either (1) on or after the fifth anniversary of
the Participant's Participation Date, or (2) before the fifth anniversary of the
Participant's Participation Date and such Termination of Employment is the
result of the death or Disability of the Participant. If a Participant has a
Termination of Employment that results from a termination of employment by the
Company or a Subsidiary other than for Cause (and other than due to the
Participant's Disability) after the fourth anniversary of the Participant's
Participation Date and before the fifth anniversary of the Participant's
Participation Date, then the Participant shall be entitled to the benefits
described in section 4.2; provided, however, that in such circumstances the
amount of the Participant's Annual Benefit Amount shall be multiplied by 0.8
(80%) for purposes of calculating the Participant's benefits under the other
provisions of this Plan. Except as provided in the preceding sentence, if a
Participant's Termination of Employment occurs prior to the fifth anniversary of
the Participant's Participation Date (and other than a Termination of Employment
that is the result of the Participant's death or Disability), then he shall
cease to be a Participant on the date of such Termination of Employment and he
shall not be entitled to any benefits hereunder. There will be no pro-rated
benefits or pro-rated vesting in such circumstances. In any event, a
Participant's rights to benefits under this Plan are subject to section 5.1.
4.2 SUPPLEMENTAL RETIREMENT BENEFITS
Subject to section 4.1, a Participant's benefits under this Plan shall
be annual supplemental retirement benefits paid in substantially equal
installments (not less frequently than quarterly and without interest) over a
period of twenty (20) years commencing as of a date determined in accordance
with section 4.2. Subject to section 8.8, a Participant's aggregate annual
supplemental retirement benefit under this Plan for any such year shall equal
the amount of the Participant's Annual Benefit Amount. (For example, subject to
sections 4.1 and 8.8, if a Participant is entitled to benefits under this Plan
and the Participant's Annual Benefit Amount is $100,000, the Participant will be
paid $100,000 per year over a twenty (20) year period commencing as of a date
determined in accordance with section 4.2. If payments are to be made on a
quarterly basis, then the Participant will receive four $25,000 (again, subject
to section 8.8) payments for each year during that period.)
4.3 COMMENCEMENT AND DURATION
If a Participant is entitled to the benefits described in section 4.2,
the first benefit payment to the Participant pursuant to section 4.2 shall be
paid by the Company no later than six (6) months after the last to occur of the
following: (1) the Participant's attainment of age 55; (2) the tenth anniversary
of the Participant's Participation Date; or (3) the Participant's Termination of
Employment. After a Participant's benefits commence, the Company shall continue
to make the payments to the Participant required by section 4.2 until all of the
Participant's benefits have been paid (i.e., supplemental retirement benefits
pursuant to section 4.2 have been paid to the
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Participant for a period of twenty (20) years or the remaining benefits are paid
in a lump sum in accordance with this Plan). Each benefit payment shall be made
in cash.
4.4 BENEFITS IN THE EVENT OF DEATH
In the event of a Participant's death on or after the fifth anniversary
of the Participant's Participation Date, the Participant's Plan benefit shall be
paid to the Participant's Beneficiary in accordance with the following rules:
(a) If the Participant dies before his benefits under this Plan
commenced, the first benefit payment pursuant to section 4.2 with respect to the
Participant shall, subject to section 5.1, be paid to the Participant's
Beneficiary no later than six (6) months after the last to occur of the
following: (1) the year in which the Participant would have attained age 55 had
he continued to live; (2) the tenth anniversary of the Participant's
Participation Date; or (3) the Participant's death. After such benefits
commence, the Company shall continue to make payments to the Participant's
Beneficiary until all of the Participant's benefits have been paid (i.e.,
supplemental retirement benefits pursuant to section 4.2 have been paid to the
Participant's Beneficiary for a period of twenty (20) years or the remaining
benefits are paid in a lump sum in accordance with this Plan). Each benefit
payment shall be made in cash.
(b) If the Participant dies after his benefits under this Plan have
commenced and before all such benefits have been paid, the Participant's
remaining benefits shall be paid to the Participant's Beneficiary in cash at the
same time that they would have otherwise been paid to the Participant.
ARTICLE V
SPECIAL BENEFIT PAYMENT RULES
5.1 RECEIPT AND RELEASE.
Notwithstanding anything else contained in this Plan to the contrary,
as a condition precedent to any Company benefit obligation under this Plan to
any Participant (or to the Participant's Beneficiary in the event of the
Participant's death), the Participant (or Beneficiary, as the case may be)
shall, upon or promptly following the Participant's Termination of Employment,
provide the Company with a valid, executed, written Release (as defined below)
(in a form provided by or reasonably acceptable to the Company) and such release
shall have not been revoked by the Participant (or Beneficiary) pursuant to any
revocation rights afforded by applicable law. The Company shall have no
obligation to make any payment to the Participant (or Beneficiary) pursuant to
this Plan unless and until the Release contemplated by this section 5.1 becomes
irrevocable by the Participant (or Beneficiary) in accordance with all
applicable laws, rules and regulations.
As used in the preceding paragraph, "Release" shall mean a written
release, discharge and covenant not to sue entered into by the Participant on
behalf of himself, his descendants, dependents, heirs, executors,
administrators, assigns, and successors, and each of them, of and in favor of
the Company, its parent (if any), the Company's Subsidiaries and other
affiliates, past and present, and each of them, as well as its and their
trustees, directors, officers, agents, attorneys, insurers, employees,
stockholders, members, representatives, assigns, and successors,
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past and present, and each of them (the "releasees"), with respect to and from
any and all claims, wages, demands, rights, liens, agreements, contracts,
covenants, actions, suits, causes of action, obligations, debts, costs,
expenses, attorneys' fees, damages, judgments, orders and liabilities of
whatever kind or nature in law, equity or otherwise, whether now known or
unknown, suspected or unsuspected, and whether or not concealed or hidden, which
he may then own or hold or he at any time theretofore owned or held or may in
the future hold as against any or all of said releasees, arising out of or in
any way connected with the Participant's employment relationship with each and
every releasee with which the Participant has had such a relationship, or the
termination of his employment or any other transactions, occurrences, acts or
omissions or any loss, damage or injury whatever, known or unknown, suspected or
unsuspected, resulting from any act or omission by or on the part of said
releasees, or any of them, committed or omitted prior to the date of such
release including, without limiting the generality of the foregoing, any claim
under Section 1981 of the Civil Rights Act of 1866, Title VII of the Civil
Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with
Disabilities Act, the Family and Medical Leave Act of 1993, the California Fair
Employment and Housing Act, the California Family Rights Act, any other claim
under any other federal, state or local law or regulation, and any other claim
for severance pay, bonus or incentive pay, sick leave, holiday pay, vacation
pay, life insurance, health or medical insurance or any other fringe benefit,
medical expenses, or disability (except that such release shall not constitute a
release of any Company obligation to the Participant under this Plan upon the
Company's receipt of such release[, under any benefit plan of a releasee that is
intended to be qualified under the Employee Retirement Income Security Act of
1974, as amended, or any claim for severance benefits expressly contemplated by
a written employment contract with the Company or a Subsidiary]). The Release
shall also contain the Participant's warrant that he has not theretofore
assigned or transferred to any person or entity, other than the Company, any
released matter or any part or portion thereof and that he will defend,
indemnify and hold harmless the Company and the aforementioned releasees from
and against any claim (including the payment of attorneys' fees and costs
actually incurred whether or not litigation is commenced) that is directly or
indirectly based on or in connection with or arising out of any such assignment
or transfer made, purported or claimed.
5.2 ACCELERATION
The Committee may, in its sole discretion and notwithstanding anything
else contained herein to the contrary, accelerate the payment of one or more
benefits under this Plan (in lieu of payment of the benefits as originally
scheduled). Without limiting the preceding sentence, the Committee may, in its
sole discretion, pay any Participant's benefits or remaining benefits, as the
case may be, in the form of a lump sum payment. In the event of an acceleration
or a lump-sum payout contemplated by this section 5.2, the amount of any
accelerated or lump-sum payment shall equal the Actuarial Equivalent of the
amount of the benefit(s) that would have otherwise been paid. The calculation of
the Actuarial Equivalent of the benefit(s) for such purpose shall take into
consideration (if applicable) that benefits would not otherwise have commenced
prior to the later of the Participant's attainment of age 55 or the tenth
anniversary of his Participation Date.
5.3 LUMP SUM OPTION FOR BENEFICIARIES
If a Participant dies and one of the assets of the Trust is a life
insurance policy on the life of the deceased Participant, the Participant's
Beneficiary may elect, in lieu of the benefits
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otherwise payable to the Beneficiary under Article IV, a lump sum payment. The
Committee may, in its sole discretion, make a lump sum payment alternative
available to a Beneficiary in the event the assets of the Trust do not include a
life insurance policy on the life of the deceased Participant. If a Beneficiary
is entitled to make a lump sum payment election, such election may be made prior
to the commencement of benefits or at any time during the period of benefit
payments. This election will result in a significant penalty to the Beneficiary
since the amount of the lump sum payment determined under this section 5.3 is
substantially less than the Actuarial Equivalent of the benefits which would
otherwise be payable to the Participant or his Beneficiary. The lump sum amount
shall be determined by multiplying the Actuarial Equivalent of the remaining
payments by .94. The lump sum benefit shall be paid no later than six (6) months
after the later of (1) the Beneficiary's election, (2) the date that the
Participant would have attained age 55, or (3) the tenth anniversary of the
Participant's Participation Date.
ARTICLE VI
CHANGE IN CONTROL
6.1 FULL VESTING AND LUMP SUM OPTION UPON CHANGE IN CONTROL
All Participants at the time of a Change in Control (excluding, without
limitation, those Participants who had a Termination of Employment prior to the
Change in Control and who had not again become Participants in accordance with
section 3.4) shall be deemed to be fully vested in their benefits under this
Plan (that is, each such Participant shall be deemed to have been a Participant
for at least five years for purposes of section 4.1). Furthermore, in the event
of a Change in Control, a Participant (or Beneficiary) may elect to receive an
immediate lump sum payment in lieu of all benefits otherwise payable to the
Participant (or Beneficiary) under this Plan. Such election may be made prior to
the commencement of benefits or at any time during the period of benefit
payments. This election will result in a significant penalty to the Participant
(or Beneficiary), since the amount of the lump sum benefit provided under
section 6.2 is substantially less than the Actuarial Equivalent of the benefits
which may otherwise be payable to the Participant (or Beneficiary). The lump sum
benefit shall be paid within 30 days of the election by the Participant (or
Beneficiary).
6.2 AMOUNT OF LUMP SUM BENEFIT
The amount of the lump sum benefit payable to the Participant (or
Beneficiary) pursuant to section 6.1 shall be determined by multiplying the
Actuarial Equivalent of the Participant's benefit payments (or remaining
payments, as the case may be) by .94. As to any Participant who had not yet
commenced receiving benefits under this Plan, such calculation shall be made
assuming that the Participant's Termination of Employment was the date of his
election. For this purpose, such benefit shall be paid at the time specified in
section 6.1 regardless of whether the Participant had attained age 55 or had
participated in the Plan for at least ten years since his Participation Date;
provided that the calculation of the Actuarial Equivalent of the Participant's
benefit payments pursuant to this section 6.2 shall take into consideration (if
applicable) that benefits would not otherwise have commenced prior to the later
of the Participant's attainment of age 55 or the tenth anniversary of his
Participation Date.
6.3 ADVANCE ELECTION
In lieu of the lump sum payout described in section 6.2, a Participant
may receive a payout equal to the Actuarial Equivalent of his Plan benefits (or
remaining benefits, as the case
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may be) in connection with a Change in Control if he has provided the Company an
irrevocable election to receive a lump sum upon a Change in Control and such
election is provided at least 12 months in advance of the Change in Control. In
such event, such benefit shall be paid within 30 days after the date of the
Change in Control regardless of whether the Participant had attained age 55 or
had participated in the Plan for at least ten years since his Participation
Date; provided that the calculation of the Actuarial Equivalent of the
Participant's benefit payments pursuant to this section 6.3 shall be made
assuming that the Participant's Termination of Employment was the date of the
Change in Control and shall take into consideration (if applicable) that
benefits would not otherwise have commenced prior to the later of the
Participant's attainment of age 55 or the tenth anniversary of his Participation
Date.
ARTICLE VII
TRUST
7.1 ESTABLISHMENT OF THE TRUST
The Company shall establish a Trust as a part of this Plan in order to
implement and carry out the provisions of this Plan and to finance the benefits
under this Plan. The Company shall establish the Trust by entering into a Trust
Agreement with a Trustee selected by the Committee. The Trust shall be an
irrevocable grantor Trust within the meaning of Code sections 671 through 677,
and the Company shall be treated as the owner of the Trust. It is intended that
the Trust shall be in such form as may be necessary for this Plan to be deemed
unfunded for purposes of the Employee Retirement Income Security Act of 1974, as
amended.
The Trust shall maintain a Trust Fund. The administration and
management of the Trust Fund shall be set forth in the Trust Agreement, the
terms of which shall be consistent with the provisions of this Plan. Nothing in
the Trust Agreement shall impair the rights of the Participant and his
Beneficiary nor shall the agreement limit the obligations of the Company under
this Plan.
7.2 CONTRIBUTIONS
The Company shall make such contributions to the Trust as it may
determine in its sole discretion. Notwithstanding the preceding sentence: (1)
within 30 days of a Change in Control, the Company shall make a contribution to
the Trust Fund that causes the assets of the Trust Fund to equal the then
Actuarial Equivalent of the benefits remaining due under this Plan; (2) within
fifteen days of each January 1 following a Change in Control, the Company shall
make any additional contribution necessary to cause the assets of the Trust Fund
to equal, as of that January 1, the Actuarial Equivalent of the benefits
remaining due under this Plan; and (3) following a Change in Control, each time
an Eligible Person is designated as a participant in this Plan the Company shall
promptly (and in no event more than five days after the designation) make any
additional contribution necessary to cause the assets of the Trust Fund to
equal, as of the date of that designation, the Actuarial Equivalent of the
benefits remaining due under this Plan (assuming, for purposes of such benefit
calculation, that the designated Eligible Person is a Participant as of the date
of his designation as a participant).
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7.3 PAYMENT OF BENEFITS
The benefits under this Plan shall be paid from the Trust Fund. To the
extent the Trust Fund is insufficient to pay all required benefits under this
Plan, payment of benefits shall be made from the general assets of the Company.
ARTICLE VIII
ADMINISTRATION
8.1 ADMINISTRATION
The Committee shall have principal administrative authority over this
Plan. The Committee shall be authorized to construe and interpret all of the
provisions of this Plan, to adopt procedures and practices concerning the
administration of this Plan, and to make any determinations necessary hereunder,
which shall (subject to section 9.7) be binding and conclusive on all parties.
The Administrative Committee shall have only the authority expressly
contemplated by this Plan or otherwise delegated by the Committee. An
Administrative Committee member may resign by delivering his written resignation
to the Company or be removed by the Company by delivery of written notice of
removal, to take effect on the date specified therein. Vacancies on the
Administrative Committee due to resignation, death, removal or other causes
shall be filled promptly by the Company. The Committee may assume the authority
of the Administrative Committee with respect to this Plan at any time.
The Committee and Administrative Committee may each appoint one or more
individuals and delegate such of its power and duties as it deems desirable to
any such individual, in which case every reference herein made to the Committee
or Administrative Committee, as applicable, shall be deemed to mean or include
the individuals as to matters within their jurisdiction.
8.2 DECISIONS AND ACTIONS OF COMMITTEE
The Committee and Administrative Committee each may act at a meeting or
in writing without a meeting. All decisions and actions of each of the Committee
and Administrative Committee shall be made by vote of the majority of the
members thereof, including actions in writing taken without a meeting.
8.3 RULES AND RECORDS OF THE COMMITTEE
The Committee may make such rules and regulations in connection with
its administration of this Plan as are consistent with the terms and provisions
hereof. The Administrative Committee shall keep a record of each Participant's
name, address, social security number, Participation Date, Annual Benefit
Amount, and such other data as may be necessary for the proper administration of
this Plan, and shall be responsible for supplying all information and reports to
the Internal Revenue Service, Department of Labor, Participants, Beneficiaries,
and others as required by law.
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8.4 EMPLOYMENT OF AGENTS
The Committee may employ agents, including without limitation,
accountants, actuaries, consultants, or attorneys, to exercise and perform the
powers and duties of the Committee as the Committee delegates to them, and to
render such services to the Committee as the Committee may determine, and the
Committee may enter into agreements setting forth the terms and conditions of
such service.
8.5 AGENT FOR SERVICE OF LEGAL PROCESS
The Chairman of the Committee shall serve as agent for service of legal
process.
8.6 PLAN EXPENSES
The Company shall pay all expenses reasonably incurred in the
administration of this Plan and Trust; provided, however, that the Trustee may
pay such expenses from the assets of the Trust, to the extent such expenses have
not been paid by the Company. In such event, the Company shall reimburse the
Trustee promptly for any such expenses paid by the Trustee from the Trust. The
members of each of the Committee and Administrative Committee shall serve
without compensation for their services as such, but all expenses of each of the
Committee and Administrative Committee shall be paid by the Company. No employee
of the Company shall receive compensation from this Plan regardless of the
nature of his services to this Plan.
8.7 INDEMNIFICATION
To the extent permitted by law, each of the Committee and
Administrative Committee and each and every agent and representative of each
such committee shall be indemnified by the Company and saved harmless against
any claims, and the expenses of defending against such claims, resulting from
any action or conduct relating to the administration of this Plan except claims
arising from gross negligence, willful neglect, or willful misconduct.
8.8 TAX WITHHOLDING
The Company or Trustee shall withhold from any payment to the
Participant or Beneficiary any federal, state, or local taxes required by law to
be withheld with respect to such payment. With respect to any other federal,
state or local taxes required by law to be withheld with respect to a
Participant's benefits under this Plan, the Company and its Subsidiaries may
reduce any amount of compensation otherwise payable to the Participant by the
amount of such withholding obligations or provide for an off-set of such amounts
against any benefits that may then be due (or may become due) to the Participant
or his Beneficiary under this Plan.
8.9 CLAIMS PROCEDURE
(a) SUBMISSION OF CLAIMS. Claims for benefits under this Plan and
any Participation Agreement shall be submitted in writing to
the Committee or to an individual designated by the Committee
for this purpose.
(b) DENIAL OF CLAIM. If any claim for benefits is wholly or
partially denied, the claimant shall be given written notice
within 60 days following the date on which the claim is filed,
which notice shall set forth -
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(1) the specific reason or reasons for the denial;
(2) specific reference to pertinent Plan and Trust
provisions on which the denial is based;
(3) a description of any additional material or
information necessary for the claimant to perfect the
claim and an explanation of why such material or
information is necessary; and
(4) an explanation of this Plan's claim review procedure.
If the claim has not been granted, and if written notice of
the denial of the claim is not furnished within 60 days
following the date on which the claim is filed, the claim
shall be deemed denied for the purpose of proceeding to the
claim review procedure.
(c) CLAIM REVIEW PROCEDURE. The claimant or his authorized
representative shall have 60 days after receipt of written
notification of denial of a claim to request a review of the
denial by making written request to the Committee (or its
delegate), and may review pertinent documents and submit
issues and comments in writing within such 60-day period. Not
later than 60 days after receipt of the request for review,
the Committee shall render and furnish to the claimant a
written decision which shall include specific reasons for the
decision, and shall make specific references to pertinent Plan
and Trust provisions on which it is based. The Committee
decision shall only be subject to further review as described
in section 9.7. If a decision on review is not furnished to a
claimant within the specified time period, the claim shall be
deemed to have been denied on review.
ARTICLE IX
MISCELLANEOUS
9.1 RIGHTS AGAINST THE COMPANY
Neither the establishment of this Plan, nor any modification thereof,
nor any payments hereunder, nor any Participation Agreement, shall be construed
to give any Participant the right to be retained in the employ of the Company or
any Subsidiary or to interfere with the right of the Company or any Subsidiary
to discharge the Participant at any time, subject to the terms of any employment
agreement between the Participant and the Company or any Subsidiary.
9.2 RIGHTS UNDER THE COMPANY'S OTHER RETIREMENT PLANS
Nothing in this Plan shall be construed to limit, broaden, restrict,
grant, or otherwise affect any rights of any Participant or Beneficiary under
the Company's other retirement plans, nor grant any additional rights or
benefits to any Participant or Beneficiary under the Company's other retirement
plans, nor in any way to limit, modify, repeal, or otherwise affect the
Company's or its Board's right to amend or modify any such retirement plan.
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<PAGE>
9.3 PAYMENT OF BENEFITS TO INCOMPETENT
If the Committee receives evidence that -
(a) a person entitled to receive any benefit under this Plan is
legally, physically, or mentally incompetent to receive such
benefit and to give a valid release therefore, and
(b) another person or an institution is then maintaining or has
custody of such person and no guardian, committee, or other
representative of the estate of such person has been duly
appointed by a court of competent jurisdiction,
the payment of such benefit may be made to such other person or institution as
the Committee may determine. Any such payment shall be a payment on behalf of
such person and shall, to the extent thereof, be a complete discharge of any
liability under this Plan to such person, and neither the Company, the Trustee,
nor any member of the Board or the Committee shall be liable to any person or
individual by reason of such payment.
9.4 MISSING PERSON
In the event any benefit shall become payable to any person or upon his
death to his legal representative and, if after written notice from the
Committee mailed to such person's last-known address as shown in the Company's
records, such person or his legal representative shall not have presented
himself to the Committee within six years after the mailing of such notice, then
the Committee may, in its sole discretion, distribute such amount, including any
benefit thereafter becoming due to such person or legal representative, among
the spouse and blood relatives of such person. Payments made in good faith to
any person, to a person's legal representative, or to any individual(s) who
have, on the presentation of reasonable proof, established to the satisfaction
of the Committee that he is the spouse or blood relative of such person, shall,
to the extent of such payments, be a complete discharge of all obligations
arising pursuant to this Plan, and neither the Company, the Trustee, nor any
member of the Board or the Committee shall be liable to any person or individual
by reasons of such payments.
9.5 AMENDMENT OR TERMINATION
This Plan may be amended or terminated, in whole or in part, at any
time by written action of the Board or Committee or, as to administrative
amendments, by written action of the Administrative Committee; provided that any
amendment that materially and adversely affects any Participant in this Plan at
the time of such amendment must be consented to in writing by that Participant
before it shall have any effect as to that Participant. The Board may terminate
the Plan without Participant consent; provided that the Board fully vests all
Participants then participating in the Plan and pays each such Participant's
Plan benefit (or remaining benefit, as the case may be) in a single lump sum
payment within thirty (30) days of the termination of the Plan. In such event,
the amount of the lump sum benefit payable to a particular Participant shall
equal the Actuarial Equivalent of the Participant's benefits (or remaining
benefit payments, as the case may be), assuming in the case of a Participant who
had not previously commenced benefits that his benefits were to commence
immediately. For this purpose, such benefit shall be paid at the time specified
regardless of whether the Participant had attained age 55 or had participated in
the Plan for at least ten years since his Participation Date; provided that the
calculation of the Actuarial Equivalent of the Participant's benefit payment
pursuant to this
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section 9.5 shall take into consideration (if applicable) that benefits would
not otherwise have commenced prior to the later of the Participant's attainment
of age 55 or the tenth anniversary of his Participation Date.
9.6 MERGER OR CONSOLIDATION OF PLAN AND TRUST
Neither this Plan nor the Trust may be merged or consolidated with, nor
may its assets or liabilities be transferred to, any other plan or trust without
the prior written consent of each affected Participant or, as to any Participant
who has died, his Beneficiary if such Beneficiary remains entitled to benefits
under this Plan.
9.7 ARBITRATION/INTEREST ON UNPAID AMOUNTS/CONTROLLING LAW
(a) A Participant or Beneficiary may further appeal pursuant to
this section a Committee decision under section 8.9(b) on his
appeal. The Participant or Beneficiary may submit the
controversy to final and binding arbitration pursuant to the
then most applicable Rules of the American Arbitration
Association; provided, however, that unless the parties
otherwise agree, the arbitration shall be before a single
arbitrator selected either by mutual agreement or, failing
agreement, from a list of seven arbitrators provided by AAA,
(1) four of whom shall be retired judges of the Superior or
Appellate Courts of California who are residents of Los
Angeles or Orange County and, if such list exists at the time
of the dispute, who are members of the Independent List of
Retired Judges, and (2) three of whom shall be members of the
National Academy of Arbitrators, resident in Los Angeles or
Orange Counties. In the event the parties are unable to agree
upon such an arbitrator from such list of seven, each party
shall strike one name in turn with the first to strike being
chosen by lot. When only one name remains, that person shall
be the parties' arbitrator. The parties hereto expressly waive
their rights, if any, to have such matters heard by a jury or
a judge, whether in state or federal court. The cost of the
arbitration, including, but not limited to, any reasonable
legal fees or other expenses incident thereto incurred in
connection with such arbitration, shall be borne by the
Company unless the arbitrators(s) determines that the
Participant's or Beneficiary's claim is frivolous, in which
case the Participant or Beneficiary shall bear his own legal
fees. In the arbitration the Committee's decision on appeal
shall not be entitled to a presumption of correctness; rather,
the dispute shall be decided de novo.
(b) The Company agrees to pay interest on any amounts payable to a
Participant or Beneficiary under this Plan which are not paid
within 30 days after the date when due and on any money
judgment which is awarded to the Participant or Beneficiary
following a proceeding to enforce any portion of this Plan
from the date that payments should have been made under this
Plan. Such interest shall be calculated at the prime rate
offered by Bank of America, or its successor, from the date
that payments should have been made under this Plan to the
time of actual payment.
(c) The provisions of this Plan shall be construed, interpreted,
administered, and enforced according to applicable federal law
and the laws of the State of California, without giving effect
to conflict of laws principals thereunder and to the extent
not preempted by federal law.
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9.8 RIGHTS TO TRUST FUND ASSETS
No Participant or Beneficiary shall have any right to, or interest in,
any assets of the Trust Fund upon his Termination of Employment or otherwise,
except as provided in this Plan, and then only to the extent of the benefits
payable under this Plan to him that are payable out of the assets of the Trust
Fund.
9.9 NONTRANSFERABILITY
In no event shall the Company or Trustee make any payment under this
Plan to any assignee or creditor of a Participant or Beneficiary, except as
otherwise required by law. Prior to the time of a payment hereunder, a
Participant or Beneficiary shall have no rights by way of anticipation or
otherwise to assign or otherwise dispose of any interest under this Plan, nor
shall rights be assigned or transferred by operation of law.
9.10 ILLEGALITY OF PARTICULAR PROVISION
The illegality of arty particular provision of this document shall not
affect the other provisions, and the document shall be construed in all respects
as if such invalid provision were omitted.
IN WITNESS WHEREOF, the Company has adopted and signed this Plan as of
the Effective Date first set forth above.
"Company"
KB Home, a Delaware Corporation
/s/ Cory F. Cohen 10/23/02
By: Cory F. Cohen
Title: SVP, Tax
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